Arbitration

ARBITRATION

Arbitration, a form of alternative dispute resolution (ADR), is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides.[1] Other forms of ADR include mediation[2] (a form of settlement negotiation facilitated by a neutral third party) and non-binding resolution by experts. Arbitration is often used for the resolution of commercial disputes, particularly in the context of international commercial transactions. The use of arbitration is also frequently employed in consumer and employment matters, where arbitration may be mandated by the terms of employment or commercial contracts.

Arbitration can be either voluntary or mandatory (although mandatory arbitration can only come from a statute or from a contract that is voluntarily entered into, where the parties agree to hold all disputes to arbitration, without knowing, specifically, what disputes will ever occur) and can be either binding or non-binding. Non-binding arbitration is, on the surface, similar to mediation. However, the principal distinction is that whereas a mediator will try to help the parties find a middle ground on which to compromise, the (non-binding) arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the quantum of damages payable.

Arbitration is a proceeding in which a dispute is resolved by an impartial adjudicator whose decision the parties to the dispute have agreed, or legislation has decreed, will be final and binding. Arbitration is not the same as:

Advantages and disadvantages

Parties often seek to resolve their disputes through arbitration because of a number of perceived potential advantages over judicial proceedings:

when the subject matter of the dispute is highly technical, arbitrators with an appropriate degree of expertise can be appointed (as one cannot "choose the judge" in litigation)

arbitration is often faster than litigation in court

arbitration can be cheaper and more flexible for businesses

arbitral proceedings and an arbitral award are generally non-public, and can be made confidential[6]

because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court judgments

in most legal systems, there are very limited avenues for appeal of an arbitral award, which can be either an advantage (in that the dispute is over and done with, period), or a disadvantage (see below).

arbitration may be subject to pressures from powerful law firms representing the stronger and wealthier party[citation needed]

arbitration agreements are sometimes contained in ancillary agreements, or in small print in other agreements, and consumers and employees sometimes do not know in advance that they have agreed to mandatory binding pre-dispute arbitration by purchasing a product or taking a job

if the arbitration is mandatory and binding, the parties waive their rights to access the courts and to have a judge or jury decide the case

in some arbitration agreements, the parties are required to pay for the arbitrators, which adds an additional layer of legal cost that can be prohibitive, especially in small consumer disputes[citation needed]

in some arbitration agreements and systems, the recovery of attorneys' fees is unavailable, making it difficult or impossible for consumers or employees to get legal representation[citation needed]; however most arbitration codes and agreements provide for the same relief that could be granted in court

if the arbitrator or the arbitration forum depends on the corporation for repeat business, there may be an inherent incentive to rule against the consumer or employee[citation needed]

there are very limited avenues for appeal, which means that an erroneous decision cannot be easily overturned

although usually thought to be speedier, when there are multiple arbitrators on the panel, juggling their schedules for hearing dates in long cases can lead to delays

in some[who?] legal systems, arbitral awards have fewer enforcement options than judgments; although in the United States arbitration awards are enforced in the same manner as court judgments and have the same effect

arbitrators are generally unable to enforce interlocutory measures against a party, making it easier for a party to take steps to avoid enforcement of an award, such as the relocation of assets offshore

unions may only make a weak effort to defend one member or a small group of members in arbitration due to increasing legal fees, without explaining to the members the adverse consequences of an unfavorable ruling

rule of applicable law is not necessarily binding on the arbitrators, although they cannot disregard the law[citation needed]

discovery may be more limited in arbitration or entirely nonexistent

the potential to generate billings by attorneys may be less than pursuing the dispute through trial

unlike court judgments, arbitration awards themselves are not directly enforceable. A party seeking to enforce an arbitration award must resort to judicial remedies, called an action to "confirm" an award

although grounds for attacking an arbitration award in court are limited, efforts to confirm the award can be fiercely fought[citation needed], thus necessitating huge legal expenses that negate the perceived economic incentive to arbitrate the dispute in the first place.